CHAPTER 1

OVERVIEW

INTRODUCTION AND BACKGROUND

A Rapidly Changing World

Since the WTEC report for NASA and NSF in 1992/1993, the satellite industry has undergone dramatic changes. There has been a virtual revolution in all aspects of the industry: technology, services and applications, financial and management arrangements, and policy and regulation. In short, a global revolution in satellite communications is occurring. In 1992, satellite technology was seen as the prime force of change and it appeared that crucial and ambitious technology development programs in Japan and Europe could pull ahead of U.S. technology. This now seems not as clear cut as it was then.

Today, while technological advantage is still seen as very important to future success, the biggest present concerns are not technologies. Instead, it seems that policies, standards and protocols, regulatory decisions, capital financing, trade arrangements and new consumer oriented digital market forces (including Internet use and broadband digital services) are dominating the direction and speed of change. In this regard the United States more often than not is leading the way; but there is more to consider.

There is no reason for complacency. Many key new technologies are being developed and their deployment could still redefine the landscape of satellite communications leadership five to ten years hence. The international satellite communications industry is alive and very well. There is certainly much valuable foreign technology. Examples are the extremely broadband optical communications systems of Contraves, the large aperture antenna structures being developed at Toshiba for Japan's ETS VIII satellite, and huge inflatable antenna systems in Russia. There are also the phased array antenna systems for the Japanese Gigabit Satellite Project, thermal and propulsion systems being developed under the French Stentor project, and the strides forward being planned by the Korean aerospace industry (particularly Hyundai). This study is an expansion and an update of the one conducted under NASA and NSF funding in 1992. It is broadened in scope to cover not only technology, but also services, applications, markets, standards, policy, regulations and trade. It also is geographically expanded to cover significant new entrants into the field. A total of 61 sites or localities were directly addressed as reported on in the site visit reports. Figure 1.1 shows the countries visited or otherwise covered during the 1992/1993 and 1997 studies, respectively.

Consideration is thus given in this report to the space communications industries in Canada, France, Germany, India, Israel, Italy, Japan, Korea, Russia, the United Kingdom, and the United States. In order to benchmark international developments in relation to national technology, several visits and "virtual site visits" were undertaken within the United States. Prior to conducting the site visits that are documented in the latter part of this report, a number of organizations were visited in order to discuss the purpose of the study and to validate the methodology used in its execution. The organizations visited were: the Aerospace Corporation, Boeing Defense and Space, the Federal Communications Commission, Hughes Communications, Iridium LLC, the Jet Propulsion Laboratory, Lockheed Martin, NASA Headquarters, and the National Telecommunications and Information Administration (NTIA) (see Appendix E). During each visit, a representative of the WTEC study team described the proposed study and solicited feedback on the methodology and the specific areas to be investigated.


Fig. 1.1. Countries visited or surveyed in 1997.

A surprising degree of consensus was evident across the organizations visited. Clearly, the primary goal of the study was to evaluate the world situation with regard to competitiveness and technological capability vis--vis the United States. However, it was equally important, according to these knowledgeable organizations, that the team also investigate the various policy, regulatory, trade, standards and spectrum issues which have been identified as so important to the future success of commercial satellite communications.

A panel of university professors, aerospace and telecommunications executives, and scientists from national research institutions has devoted nearly a year of effort to bring this report to fruition. This report documents fundamental change in the satellite industry in just five years, a change that might be called the direct-to-consumer revolution in satellite telecommunications services.

Vigorous Market Projections for Satellite Communications

This report reveals a new pattern of innovation and change in satellite communications and one that is happening at an accelerating pace. It involves tens of billions of dollars in new investment under innovative new capital financing. It includes the deployment of direct-to-the-consumer technology, bypassing traditional infrastructure.

Perhaps the best way to expose the nature and the degree of this change is to compare how satellite communications markets were seen in 1992 and projected into the future with the extent and nature of the changes that are seen and projected today. The previous study projected a rapid growth for satellite services between 1992 and 2002, but the current Panel members believe that new satellite services and even faster growth than anticipated of existing services require us to adjust our forecasts upwards. Although this panel did not conduct an exhaustive market study, the consensus of the industry results in the market estimates presented in Table 1.1. Table 1.1 shows the actual satellite market figures for 1992 and the forecast for 2002, as reported in the 1992/1993 study. This is contrasted with our new upward revisions of those forecasts for 2002 and new forecasts for 2005. The revisions in revenue in the adjusted projection for 2002 reflect actual market growth figures being achieved by INTELSAT, Inmarsat and other new competitive satellite systems. The sharpest increases projected for 2005 are primarily due to the advent of the new multimedia broadband satellite services that will come on line between 2000 and 2005. These figures derive from the actual filings of the various satellite systems and independent market studies that have been undertaken by the International Engineering Consortium, Via Satellite, and other market forecasters, and compiled for use in this study.

Table 1.1
Past and Future Satellite Communication Revenues ($ billions)

SATELLITE SERVICE

1992

2002 - Original Study

2002 - Adjusted

2005 Projected

Conventional Fixed Sat Service

       

INTELSAT*

$4.5

$8.5

$9.0

$11.0

Other Intern'l Systems**

$0.9

$1.9

$2.5

$3.5

U.S./Canadian Systems

$2.3

$4.5

$4.2

$5.0

Other National Systems

$1.4

$3.4

$4.5

$6.0

All Fixed Sat Systems

$10.0

$20.0

$22.1

$29.5

         

New Ka-Band Broadband Sat Systems

       

Broadband Multimedia (GEO)

N.A.

N.A.

$1.0

$6.5

Broadband Multimedia (LEO)

N.A.

N.A.

$0.5

$6.5

All Broadband Multimedia Systems

N.A.

N.A.

$1.5

$13

         

Mobile Satellite Systems

       

Mobile Sats (Aero/Maritime)***

$0.8

$2.0

$2.2

$2.5

Mobile Sats (Land/Geo)

$0.01

$1.0

$2.1

$3.0

Mobile Sats (Land/Meo/Leo)

N.A.

$6.0

$5.5

$7.0

All Mobile Sats

$0.81

$9.0

$9.8

$12.5

         

Broadcast Satellite Systems

$0.5

$8.0

$12.0

$17.0

Military Satellite Systems

N.A.

N.A.

N.A.

N.A.

Other (Data Relay/GPS)

$0.1

$0.3

$1.5

$2.5

TOTAL SAT SERVICES

$11.4

$38.3

$45.4

$74.5



* INTELSAT line does not reflect INTELAT revenues but rather estimated revenues of Signatory sales to customers

** Other international systems include Orion, PanAmSat, and estimated international revenues of Hispasat, Optus, etc.

*** This is largely Inmarsat related and reflects not Inmarsat revenues but estimated total revenues derived from customers


Overall, the satellite communications industry is in what might be called a "Bull Market." The rapid growth projected in the last report will be achieved and exceeded. In the next five years we will see even more explosive growth than has been seen to date. The market share of satellite communications will rise from about 2.5 percent of total global telecommunications revenues today (i.e., $20 billion out of $800 billion) to perhaps 5.5% to even 6.5% of all communications services (i.e., $68 to $80 billion out of a global total of $1.2 trillion in 2005). This surge in satellite telecommunications will be due to the vision of a universal network that encompasses transport by terrestrial and satellite systems with respect to broadcast television, new multimedia services to the home and office, and land mobile services— most likely in that order of revenue over the next 5 to 10 years. A good deal of this new growth is related to broadband Internet or Intranet access, a service category only briefly alluded to in the 1992/1993 report.

Consequences to this Study of the Increasingly Competitive Marketplace

In the 1992/1993 study, a pattern existed of international cooperation with free and open worldwide exchange of information inside the international satellite community. Virtually every site visit request was openly welcomed and high-quality technical information on existing and planned R&D programs was divulged. In the current study, most requests for site visits were granted but the nature of the information shared was more limited. A number of organizations (Aerospatiale, EUTELSAT, ICO, Alcatel) actually declined visits. Sites in China were not visited since full visit reciprocity could not be arranged in the time available.

U.S. entities showed a good deal of caution in accepting site visits and providing information on future directions. In all, 61 sites and localities were visited or covered from secondary sources and good and accurate overall information was obtained. It appears, however, that future technology and policy assessment studies will be more difficult to carry out successfully in the new, more highly competitive environment even under the site visit report policies observed by the WTEC study process, which are carefully designed to protect proprietary interests.


Published: December 1998; WTEC Hyper-Librarian